Barbados

Barbados: Recovery with a Purpose


By Sir Trevor Carmichael, QC, Chancery Chambers, Barbados (01/08/2016)

Barbados continues to experience the benefits as well as the challenges of its critical interplay with the external economic and financial environment.  In broad terms, its tourism together with its international business and financial services sector are fully externally influenced and determined.  Its' ability to carve effective domestic policies towards those sectors as well as its creativity and diligence in fashioning, maintaining and expanding other home grown areas such as a buoyant renewable energy sector remain the drivers of an overall national development success. 

During the year 2015, this thesis continued to be written as the jurisdiction achieved ongoing steady recovery from the 2008 global financial crisis and its' intermittent aftershocks.  Those aftershocks have been manifested primarily in a new view of international banking regulation which is not prescribed by an overarching regulatory authority but is rather developed and designed as a policy from within the boardrooms of the international banks.

Barbados' recent performance like that of all Caribbean, Latin American and some African jurisdictions is therefore punctuated by the loss of some types of banking activity heretofore handled by the international banks.  Hence, some individuals and corporations have been adversely affected in their banking relationships primarily in the setting up of new accounts and also in the availability of ongoing correspondent bank relationships.  The matter has reached the attention of the Financial Stability Board which at one of its 2015 meeting received a preliminary report from an initial World Bank study of the problem.  The increasing costs of compliance with anti-money laundering guidelines have been cited as the major cause of this sudden volte-face, in that the international banks have asserted a presumed and resulting loss of profitability.

Notwithstanding these banking concerns, the Barbados international business sector has shown a remarkable resilience during the year 2015.  For notwithstanding the loss of a few registered international banks of Canadian parentage, there has been a countervailing interest being shown by some non-Canadian banking interests in choosing Barbados as a banking domicile for their international banking and trust operations.  Supplementing this increase in banking interest, is the significant increase in the number of new licences issued to non-banking entities engaged in the international business sector. 

During the year, new incorporations represented and mirrored the active global business climate in mergers and acquisitions which sought to ably utilise the burgeoning liquidity and cash reserves of many medium sized and large international businesses.  Barbados was therefore able to experience a more than five per cent increase in the establishing of such international business companies and societies with restricted liability.  Its continued steady growth of international insurance companies also reflected this trend, particularly as international insurance professionals continued to recognise the jurisdiction's maturity of regulators and professionals who act as an ongoing assurance of reputational quality.

Furthermore, insurance structures are increasingly acknowledging the jurisdiction's ability to provide wide ranged management through the use of its cell company legislation.   The recent resurgence in the Rent-A-Captive is represented by a company with minimum capital and surplus requirements but which is licensed to ensure that each cell transaction may be letter of credit, capital, reinsurance or some other form of acceptable guarantee.  Indeed, the legislation allows for the creation of legally separate cells without recourse to the other cells or to the core of the company.

Some of Barbados' recent insurance cellular structures have readily recognised the importance of Credit Ratings since they provide a fair opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations.  Such a rating is enhanced by its market penetration reaching often more than one hundred thousand insurance industry professionals directly from the Credit Rating Agency; and thousands of financial professionals worldwide by way of news vendors such as Reuters, Dow Jones and News Edge.  As the insurance industry and capital markets continue to merge even closer, the value of rating remains a key component of the new rent-a-captive structures which the jurisdiction continues to attract.

Barbados as a jurisdiction also continues to consolidate its overarching commitment to full sustainable development.  It has been a pioneer in the green economy particularly in the widespread use of solar energy for water heating by domestic households.  Since the decade of the nineteen seventies, solar water heaters have been locally used and from time to time have benefited from income tax concessions.  From around 2012, the use of photovoltaics for power generation by households and businesses has taken off rapidly.  As an open business friendly economy, not surprisingly, there is a growing number of suppliers in the market.  Furthermore, banks and other lending institutions have acknowledged the potential of the market and as with the previous early case of solar water heaters, Government is providing tax incentives in support.  It has contracted substantial Inter-American Development Bank funding for green energy ventures.  One very smart venture is the importation by a local firm of electric cars with access to local solar powered charging stations and with reliable ongoing maintenance. 

With a substantial amount of sun rays and wind energy, Barbados is poised to produce all of its electricity needs by households, farms and companies using wind and solar, and feeding into the central grid, in addition to meeting their own individual needs.  It is recognised that to accomplish this objective substantial investment in large scale storage is required in national efforts to save fuel imports and a consequential US$250 million in yearly foreign currency savings.  During the past year 2015 substantial progress continued in this ongoing use of solar panels for power generation by homes and businesses.  With a staggering growth of 48 per cent during 2015, total generating capacity is now currently 9.4 megawatts.  During this year, the Barbados Light and Power is expected to construct a 10 megawatt solar farm which will add significantly to the overall objective of a cleaner environment, new employment opportunities and ultimate sustainable development.

Barbados over 2015 has also witnessed further strides in its movement towards the establishment of an international Alternative Dispute Centre geared towards servicing of local and Caribbean disputes which have an international context.  By way of favourable background, the jurisdiction has a strong and viable legislative framework on the subject area.  For Barbados' 2009 International Arbitration Act is a gem in terms of its legal rigour and combined flexibility and by extension, its availability and suitability for international arbitrations.  For not only does it specifically allow for lawyers from jurisdictions other than Barbados to participate in arbitrations, but it is also adopts and furthermore extends the universally accepted UNCITRAL model law.  As regards, the old Barbados Arbitration Act of 1958 which covers domestic arbitrations, there is currently an amending draft being undertaken and which will shortly be submitted to the relevant authorities.  This draft borrowing on an excellent 1991 CARICOM (Caribbean Community) model Bill has also taken into account some of the excellent provisions of the 2015 special Delaware New Rapid Arbitration Act.

Fully cognisant and respectful that under the Caribbean Juris Project there is currently a committee putting together another CARICOM Model Bill, Barbados' private sector with the blessing of government has nevertheless gone ahead in quickly producing this present draft in an effort to have Barbados' full arbitration house in order during 2016.  The proposed enterprise creates a unique model of a non-profit company on which there will be representation from the Judiciary, the Bar Association and the Barbados Chamber of Commerce, with additional membership open to other persons within the civic, business and legal communities. Complementing this legislative and governance structure, is an initial Panel of Arbitrators and Mediators; as well as an International Advisory Board.  It is within that rubric of appointments that the jurisdiction proposes to use the opportunity to recognise, and honour those many strategic partners in the international and domestic business and professional worlds.  During 2016, it is therefore expected that Barbados will launch a Caribbean Court of Arbitration and Mediation which will benefit in funding from Government, the private sector and the professions.

Epilogue

Barbados ongoing post 2008 recovery is therefore one of resilience, constantly forging new paths and consolidating proven ground holding fast to the immortal words of W.B. Yeats "plucking till times and times are done , the silver apples of the moon; the golden apples of the sun".